On-year inflation at 7.42% in June: BPS
Urip Hudiono, The Jakarta Post, Jakarta
On-year inflation rose to 7.42 percent in June on the back of already rising cigarette prices ahead of the government's plan to hike their retail prices this month, official figures from the Central Statistics Agency (BPS) show.
In announcing the results of the latest Consumer Price Index (CPI) on Friday, the agency reported that the prices of goods and services increased by 0.5 percent in June from May.
Prices rose 7.42 percent from their levels in June last year.
The prices of cigarettes and alcoholic beverages rose 4.75 percent, the highest increase of all commodity groups. The increase in cigarette prices accounted for about 38 percent of June's overall inflation.
"It appears that the government's plan to raise the retail prices of cigarettes has already had a psychological effect on inflation, although the hike itself will only come into effect this July," BPS chief Choiril Maksum said.
The government will raise cigarette retail prices by 15 percent starting in July to meet its excise revenue target of Rp 31.4 trillion this year, as well as to discourage smoking.
Anticipating the hike, Indonesia's largest cigarette maker, PT Gudang Garam, said it had already raised the prices of its products by an average of 2.7 percent.
Inflation during the first semester of the year stands at 4.28 percent, more than half the 7.5 percent inflation rate targeted by the government for the entire year in the 2005 revised budget.
On-year inflation had eased over the past two months to 7.4 percent in May, after shooting up to 8.81 percent in March, following the government's decision to raise domestic fuel prices by an average of 29 percent.
Choiril said June's inflation rate was also the result of across-the-board price increases, particularly the prices of processed food.
BPS said the prices of processed food -- which includes cigarettes -- increased by 1.17 percent in June, accounting for nearly half of the month's inflation of 0.21 percent.
Prices of staple foods rose 0.5 percent, accounting for 0.15 percent of June's inflation.
Household and transportation costs, as well as public spending for clothing, health care and education services, rose by less than 0.5 percent and accounted for less than 0.1 percent to June's inflation.
Choiril said BPS did not detect any impact on the inflation rate from the recent weakening of the rupiah against the U.S. dollar.
The rupiah continued its week-long slide against the greenback, closing at Rp 9,770 to the dollar from Rp 9,758 on Thursday. With an economy driven mainly by consumer spending, a weaker rupiah would raise the prices of imported goods, further fueling inflation.